BMO sends a warning to brokers

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Brokers, consider yourselves warned, with a BMO exec laying out explicit plans to grow the number of mortgage specialists, needed to “take business” from competitors in a slowing market.

“We've been … pretty clear about our objective, which is -- we've been at 2 per cent mortgage growth for quite some time now and our expectation is we can grow that a little faster,” Thomas Flynn, the bank’s CFO told analysts at a conference call this week focused on first quarter financials. “We're going to have to take some business from others as the market is slowing around us.

“We plan on doing that through the activation of the investment in our sales force, our mortgage specialist sales force, which continues to grow.”

The comments come on the heels of the big bank’s release of financial results for the three months ending Jan 31. And while BMO saw its overall profits spike by 34 per cent from the year-ago period, much of that growth came courtesy of U.S. operations and lower losses on bad loans.

Profit from its Canadian book actually shrank, with higher volumes across most products “more than offset by a less than favourable mix and lower net interest margin.”

That’s perhaps the most concrete analysis the bank is willing to offer on the success of its special January rate. Analysts are suggesting  that limited-time offer – 2.99 per cent on a five-year fixed – likely helped to grow BMO’s mortgage market share in the first quarter, but at the expense of profitability, in that it further narrowed interest rate spreads.

It also saw the bank increase mortgage originations as a portion of its book, said Flynn.

“New versus renewal this past quarter was a little unusual because we did go out for this limited-time offer on our low rate product, the 2.99 per cent offer,” he said Tuesday. “So we saw an increase in new in the first quarter. It was about 50-50 from an application perspective.”

The bank is aggressively looking to add to its overall market share, with a beefed-up team of mortgage specialists.

It means that brokers will likely see the rate wars of 2011 further heat up as the all-important spring market hits.

Still, there may be less emphasis on rate this year, with the blanket of BMO road reps focused on talking up the features of their mortgage products.

“We think that this product that we've been pushing for the last couple of years fits right into the sweet spot of what we need in the country and it will help our balance grow as we move forward,” said Flynn.

  • Robert on 2012-03-01 5:43:10 AM

    Good luck BMO!! - I can't wait to compete against your crappy mobile sales force that can only sell a linear product.
    I hope all your clients can fit in your "tiny" box.

  • Ottawa Mortgage Broker on 2012-03-01 5:49:02 AM

    Not a concern. The bank mortgage specialists will continue to lack the knowledge to fully educate a client as opposed to just selling their products and rate. I for one am not concerned in the least bit. I had about 5 clients discuss the BMO 2.99% with me a month ago and all of them stayed with me at 3.19%. I never bought down a single rate, i educated my clients and they stayed with me. Rate aside, i do not bconsider the bank mortgage specialists any threat or competition.

  • Ken on 2012-03-01 5:50:34 AM

    Well the key word is "Specialist" !! How can any bank think their people are specialists ? Or even special for that matter ? They will be selling one banks offerings ! These new folks will be bank employees and will have to compete with not only the other road warriors, but the quailty broker network as well. To be profitable, you will need more than so called "specialists" to make it happen. If BMO was smart - they would re-open their doors to the quality of the broker network and pay a few underwriters a salary and bonus, versus that of MANY specialists . Good Luck BMO

  • Frank on 2012-03-01 5:59:28 AM

    Bring it on BMO. I cannot wait to see these so called "specialists" falling over themselves trying to sell the one lender product. The sooner the better.

  • James in Whitby on 2012-03-01 6:00:02 AM

    Hey BMO - BRING IT!

  • Ron Butler on 2012-03-01 6:01:37 AM

    I think that this does boil down to the quality of the sales management and the execution of the recruitment and training of the direct sales force.

    If good management is in charge and they do a good job executing their plans, it is silly for us as brokers to think they will not produce quality competitors like many in the RBC and TDCT sales forces.

    We have to think like real business people. If the richest companies in the country: who are the banks, are going to invest in developing sales forces that act like us: call on Realtors, make house calls, answer the phone with a live voice on by the second ring, try to develop creative solutions and strive to get competitive rates for their clients (albeit with one lender) why would we be so cocky as to think this is zero competition?

  • Steve the broker on 2012-03-01 6:12:53 AM

    THERE IS NO WAR AGAINST BROKERS!!! Can we stop the fear mongering? Banks want market share.. they always have... and they hire mortgage specialists in an attempt to grow market share... this isn't anything new.. but once their volumes increase, and their top producing mortgage specialists start earning more commissions $$s than the VPs, the senior management will start reviewing those mortgage files more closely...and guess what? oops.. there is some fraud happening... Sound familiar? it should.. because it was reported just 2 yrs ago in the media... $140million lawsuit filed by bmo for mortgage fraud...including some employees of the bank.. RBC did it in 2000 when they filed a lawsuit against a bunch of their top producers.... When mortgage specialists are not registered with the provincial ministry, like brokers, you will see fraud take place because there is nothing to lose...this pattern has repeated itself about 5 times in the last 20 yrs...

  • Stan Olech on 2012-03-01 6:18:49 AM

    "Amen" to Ron Butler comment - every new or crappy car on the road is potential hazard...
    "Never Underestimate competition".....

  • AB Broker on 2012-03-01 6:18:52 AM

    Ken- i agree with you.

    I'd have to give the dunce cap to both BMO and CIBC. CIBC for not rebranding Firstline, maintaining the broker relationships, and requesting branch fulfillment. BMO, well... they are the 'value village' of the finance industry. There is a runt in every litter.

    Monoline lenders, if you are reading these posts, tweak your business models so we can work together more effectively and go after the 75% of the market we don't have. It doesn't make sense for us to continue to fight over the 25% we do have.

    Brokers, throw your support behind the lenders who support us. Why are you supporting those who chose to wrestle us for our client. Wake up!!

  • Stan Olech on 2012-03-01 6:25:40 AM

    "Amen" to Ron Butler comment and AB Broker - every car , new or crap one is hazard on the road...
    Do Not Underestimate Competition .....

  • Frank on 2012-03-01 7:03:59 AM

    Since we are using car analogies. F1 Race cars stay on a track with other professional drivers...You can can take it from there. You are brokers and are differentiated in many many ways that these salespersons cannot and will not be. Banks are simply loading up on sales people and diluting much of the business they would get anyway through the referrals from their branch network. As a former banker, most of these specialists camp out at branches to either poach deals that the branch could and should have done anyway or hope that the account managers and personal bankers will be nice enough to send them business. The entrepreneurial spirit is extremely limited in the mortgage specialist sales force. Go to your local branch and take a look and ask your Personal Banker about mortgages. More often than not they'll refer it to a specialist and if they end up calling you that mortgage better fit in the box. Give it a shot and then come back and let us know your experience.

  • Broker on 2012-03-01 7:07:33 AM

    Competition has been fierce for a long time. This is business. We as brokers just need to get better and get the word out for the 67% of the Canadian population that isn't sure what we do.

  • James on 2012-03-01 7:21:49 AM

    Dear BMO
    If you ask nicely, we will let you offer mortgages though the mortgage broker channel again. Then you would have mortgage professionals representing your products, provided they are at least as good as our other lenders' programs.

  • John Dearin RPA,. AMP. on 2012-03-01 7:50:54 AM

    I understand that TD & Scotia are expected to exceed market expectations; CIBC, BMO and RBC will not meet expectations.
    From another thread: “New York-based investment bank KBW now forecasting first quarter earnings for BMO will fall short of “consensus expectations,” despite the special rate offer in January.
    Both RBC and CIBC are in the same boat, according to the KBW forecast, although Scotia and TD should actually beat analyst expectations.”
    Interesting, the two banks that deal with brokers directly will beat expectations.
    BMO offered nothing when they were in the network, why have them back? They lost last month, so they will try again. 5th and falling…expect Bridgewater to take 5th position within 5 years (sarcasm)

  • Charlie on 2012-03-01 8:02:41 AM

    Well noted by Ron, and something that is often overlooked is that we do not work on a level playing field in relation to Ministry registration of so called bank mobile mortgage specialists. We beat ourselves up on semantics but high time we band together, and have CAAMP take a stand on our behalf to ensure symmetry between our businesses. We have much more to offer.

  • Adam Jardine on 2012-03-01 8:08:39 AM

    The reality is - most brokers originate their careers from the banks. No doubt BMO will offer much less commission that a standard brokerage firm - which will lead to their sales staff cluing in and jumping ship. Sound like your own story one way or another?

  • Bob....(4 decades in lending, 20 as a broker ) on 2012-03-01 8:13:06 AM

    still a stale bank with a stale product lineup and a stale image , each new leader tries unsuccessfully to reboot , good luck

  • Steve on 2012-03-01 8:32:16 AM

    Great! The more unlicensed and incompetent bank mortgage specialists there are, the more my book of business grows. Thanks BMO! And thank yourself for your poor investment returns south of the border.

  • George Christopoulos on 2012-03-01 8:33:11 AM

    Ambitious on their part. Ask the other major banks how many reps they have hired and how many have failed or do very little business. The better reps eventually become brokers.

  • Angela Wong-Liao, Invis Inc on 2012-03-01 8:56:31 AM

    As a seasoned mortgage professional with a total banking/financing experience of over 38 years, I perceived the BMO challenge is an opportunity not a threat. First of all, we can offer mortgage products from a wide range of lenders including banks, trust companies and monoline lenders. As the banks continue to tighten up their guidelines on self-employed and rental clients, these clients will turn to mortgage professionals for advice and assitance. Banks always want to buy market share from time to time, ie: the recent BMO special pricing of 2.99% on a 5 yrs term, but it is subject to so many conditions and limited timeline because banks are a business concern, they cannot continue to undercut their profit for market share.

  • Jim A on 2012-03-02 1:15:15 AM

    You know...BMO might say whatever they want to say. Giving us independant mortgage professionals a threat like that and think we are to shiver is a joke. The BMO specialists (This also includes the TDCT and RBC specialists) have no formal education whatsoever, they may have some sort of college or university but they do not have the education and training that independent mortgage brokers and mortgage agents have. This just shows that being an independent mortgage professional is scaring a lot of the banks...especially BMO, TD CT, and RBC. They know they can not ever compete with our knoweldge, understanding, and professionalism that mortgage brokers and agents can and do bring to the table. We not only do better in rate but we do better in product choice.

  • Steve on 2012-03-02 4:39:47 AM

    When Matt Barrett left BMO, Tony Comper took over, he did well but came short on his targets, In his last year BMO became big under achievers, the fall continued when Bill Downe became the CEO. Is he responsible for the poor results quarter after quarter? Probably not, but he's the one nominating those funny executives... Sad!

  • Margaret on 2012-03-03 5:21:59 AM

    Well, the banks are getting more aggressive. The banks will do anything possible to stay on top. They had to into the insurance industry, to make more money, and I can't tell you the number of deals that have come my way, where I found so many illegalities performed by a bank mortgage rep and yet we independent agents are taking the brunt of this. Amazing.

  • John Gimblett on 2012-03-03 5:36:05 AM

    Funny thing,I just finished two BSF deals for longtime BMO clients that approached their branch during the "hayday" of the BMO 2.99% non special, my clients (the former BMO clients) had the impression their PBO was just to busy for them. Bring it BMO!!

  • Elfie Hayes on 2012-03-03 6:47:05 AM

    If the threat by BMO was intended to frighten the successful full-time Mortgage Agents, let me say it didn't.

    Those of us who have made a professional career in Mortgages, provide far more than a "rate special" if you could call it that.

    We educate and guide, we stay in touch to help clients reach their financial goals, we refer them to other full-time professionals that we have relationships with. And we made a killing when BMO offered 2.99% with all their restrictions. Our phone didn't stop ringing during that time and we didn't buy down interest rates to give our clients a great mortgage with excellent terms!

    In the past few months we have seem more deals come through our office that Banks simply can't do because they are outside of their ever-tightening guidelines. This is helping us BMO!!

    I wonder how it can possibly be profitable to hire thousands of new specialists, arm them with computers and other sales tools and then find that over 80% will never achieve success in such a competitive industry.

    Wouldn't it be a better bet to let the experienced Mortgage Agents (who pay all their own expenses) send quality business even though we earn more than a road rep for a Bank?

    I will sleep soundly tonight BMO knowing that the Boogey man is not under my bed!

  • Whatever on 2012-03-03 10:44:47 AM

    Stop bashing the mortgage specialists. You are doing exactly what they do - I have worked in mortgage originations for the past 30 yrs - recently I went back to being a specialist for an FI vs brokering. I have my broker licence (not agent) and did not leave brokering "because I couldn't make it as a broker". I can crank out mortgages all day long - if I want to. People make life choices - right now an FI is better for me and perhaps for others (benefits, life events perhaps the death of a spouse?). Eat some humble pie and stop bashing the specialists out there.

  • Paul Therien on 2012-03-04 1:00:24 AM

    For those who are calling to stop the insults of the road reps... I agree with you 100%.
    Will this mean greater competition I the industry... Yes it does. However, competition is only bad if we do not rise to the challenge. Competition drives change and more often than not innovation.
    I say, let's take a hard look at our business, and ask... "what can we do differently" to differentiate ourselves , to demonstrate value to the consumer, and to take the broker industry to the next level.
    The actions of all of the big banks of late are clear indicators that they want to compete with us on the street. That has also been the crux of the many changes happening in the broker channel of late.

  • John Hamilton on 2012-03-01 3:39:16 AM

    Sure, just like you did about 5 years ago. How did that work out for you? And where will you be getting these road reps? I guess all the part time brokers, who couldn't make a living being a broker will apply.

  • meronnotu on 2012-03-01 4:01:23 AM

    lol Ok BMO we are terrified. You are putting together a larger team of specialists who could not make it on their own to push a single lenders products. Good luck with that.

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